For those interested in holding the public sector to account for the distribution of public spending around the countries and regions and for the funds needed to sustain that spending, getting accurate perceptions of what the public sector is up to and how much it affects us is challenging. They face what is sometimes referred to as the fiscal illusion. Fiscal illusion suggests that when government revenues are not completely transparent or are not fully perceived by taxpayers, then the cost of government is seen to be less expensive than it is.
From our monitoring of devolved public finance statistics and other fiscal data about devolved public finances we noticed scepticism about the degree to which the statistics about public finances (devolved or for the UK) portray an accurate picture. Given the apprehension about the trustworthiness of public finance statistics it’s difficult to appreciate that the UK and the devolved countries are among the world’s most transparent when it comes to publishing finance data. The Whole of Government Accounts (WGA) for the UK, is widely regarded as a world-leading development in public sector financial reporting. WGA has provided a step change in the ability of the government to understand and manage its financial position. The improved transparency provided by the WGA has helped the UK Parliament to scrutinise the effects of government policy better, aiding the work of the Public Accounts Committee and other parliamentary committees in holding the UK government to account. For devolved countries users do not have access to similar insights into the public finances that the WGA provides for the UK.
The financial environment for devolved countries is changing with new tax and borrowing powers in some countries bringing about increasing autonomy with a commensurate need to strengthen accountability. There are multiple sources of data about the taxes raised and public spending in the UK’s countries and regions which may be confusing to some users. There is a clear need for consistency between different sources of these statistics (what we refer to as coherence) alongside the new statistics which will be introduced.
We have been thinking about public value of devolved public finance statistics with a focus focusing on the clarity of the insights and messages from the statistics (transparency) and how consistent the statistics are between the different sources (coherence). The statistics play a central role of these statistics in public debate and we wanted to be assured that the obvious value in this data is being fully exploited. Devolved governments face multiple demands for new data and we wished to explore whether data needs around the public assets and liabilities and the changes made due to investment have been considered and whether these data are likely to be published in the medium term
What we did and why?
Our thinking was informed by conducting extensive desk research looking at:
- The existing published devolved public finance statistics
- Existing data on the results of the Block Grant Adjustments to the Barnett formula and the consequences on devolved funding
- Comment in the public domain about the strengths and limitations of current statistics and data on devolved government funding
- Modern investment statements from advanced small countries such as New Zealand providing commentary accessible to the citizen in the street
We engaged with statisticians with the statisticians that produce devolved public finance statistics and data and with the users of such statistics including:
- Official independent forecasters
- policy-makers in devolved and Central Government departments
- Economic consultants, researchers and academics
- Audit bodies both nationally and in devolved countries
- Regional and devolved country-based think tanks
- Business Bodies
- Parliamentarians and their research and library bodies
- Citizens with an interest in inter-generational equity and fiscal responsibility
What we want to happen as a result
We have been encouraging statistical producers to engage with users and potential users of these statistics to address their priorities with respect to their perceptions of the trustworthiness of the data, the insights derived from the data and the consistency between data coming from different sources. Further, we will seek to be assured that data needs in respect to devolved countries’ assets and liabilities have been considered and assigned a priority appropriate to identified users’ needs for such data.
- Phase 1: Before the end of 2018 we had considered whether there was scope to enhance the transparency and coherence of the existing devolved public finance statistics.
- Phase 2: Between the start of 2019 and April 2019 we gathered further information on the extent to which users have articulated needs for data on devolved countries assets, liabilities and their net position.
Sharing our findings
As this work is planned in two phases, we are sharing our findings and recommendations based on the two phases outlined above. As our work focuses on public value, of which transparency is a key aspect, we are presenting the findings using a multi-media approach including:
- two presentations of the findings from the two phases (Part 1 | Part 2)
- a video interview with the regulatory assessor discussing the significance of the work (available on YouTube), and
- and a blog authored by the assessor.
In addition we are publishing today our regulatory report of the findings from our assessment of some of the main source statistics on spending – HM Treasury’s Public Expenditure Spending Analysis: Country and Regional Analysis